LOS ANGELES – A new study looking at U.S. hospital labor costs for nurses explores the comprehensive costs of employing nurses but the American Nurses Association says the study is an incomplete picture.
Professional services firm, KPMG, recently released its 2011 U.S. Hospital Nursing Labor Costs Study. Funded by the National Association of Travel Healthcare Organizations (NATHO), the study sought to learn the views of senior hospital executives on direct employee labor costs and temporary nurse usage.
“The whole purpose of the study is just to get hospitals to take a look at their all-in labor costs,” said Mark Stagen, NATHO president. “A lot of hospitals say ‘Well, we pay the nurse $30 an hour, the nurse costs $30 an hour’ and that’s just not the case. There’s a lot of other costs incorporated but nobody had ever taken the time to actually calculate them and quantify them.”
“Hospitals’ true all-in loaded cost is relatively significant and it’s something they should consider when planning their workforce strategies,” he added.
KPMG contacted chief executive officers, chief administrators, chief operations officers, chief financial officers and human resources directors at hospitals across the country. The firm received 120 replies to its survey, revealing that the average comprehensive cost of full-time direct care hospital registered nurses is 176 percent of their base hourly wage. The average all-in cost is $98,000 a year. $55,739 of that is base wages. Employer taxes and paid time off is 76 to 78 percent of the total labor cost; 12 to 13 percent is for non-bedside work costs, such as training or education; 8 to 9 percent is insurance; 1 to 2 percent is for recruiting; and a final 1 percent is for other costs.
Cheryl Peterson, director of nursing practice and policy at the ANA and Peter McMenamin, health economist with the ANA, said there is nothing too surprising in the KPMG study but they were concerned by how small the survey set was and that the salary information doesn’t seem to represent the more current data available from the Bureau of Labor Statistics.
What they did find surprising about the study was that, seemingly, chief nursing officers were not surveyed. “In fact, it was everybody but [CNOs], so you have a survey about the employment and use of nurses in a hospital and it’s not your chief nursing officer who’s responding,” commented Peterson. “I always find that to be a little suspect.”
Of most concern to the ANA, though, is a lack of connection between the costs and what hospitals get for the money they spend on nurses.
“I think (the survey) is incomplete if only because it only talks about costs and not about what nurses are doing. What contribution they’re making,” said McMenamin.
[See also: Studies show higher nurse staffing levels benefit patients; Study: Increased nurse staffing decreases costs.]
“Patients come to hospitals for nursing care, so the costs associated with nursing care are going to be higher. However, if you don’t have nurses you don’t have a business,” said Peterson. “So, when you only look at the costs without the recognition that you wouldn’t have patients if you didn’t have nurses and the contribution that the nurses make by virtue of the care they give the patients, to us, it’s, of course, an incomplete report because you are only talking about half of the discussion that needs to occur with regards to the economics associated with nurses.”
Stagen said he hopes the impact the study will make will be that hospital executives are more aware of their total labor costs so that they will “be more thoughtful when it comes to their use of temporary workforce.”
In addition to the labor costs, the study found that hospital executives expected the usage of traveling nurses to increase in the future. Traveling or temporary nurses are hired by hospitals for a variety of reasons, but mostly to cover seasonal need and nursing shortages. Survey respondents said their ideal ratio of employed nurses to temporary nurses is 90:10.
It’s smart business practice for hospitals to always have a percentage of flexible labor, said Stagen, because hospitals do not incur the long-term expenses that contribute to the higher all-in labor costs associated with permanent employees. “Flexibility is something that’s hard to put a dollar value on,” he said.
